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Hello. I had to describe the difference between current and long-term assets and liabilities. And why I

think it is important for assets and liabilities to be distinguished in terms of current and long-term. Below is my answer and I would like to make sure that it makes sense and also if the grammar makes sense as well. Here is my answer:


The difference between current and long-term assets is that current assets are assets that a company is expected to use within a year of its operating cycle. Long-term assets are usually investments such as stocks and bonds, land or buildings that a company is not currently using in its operating activities, and long-term notes receivable (Kimmel & Weygandt, 2017). A current asset might include a balance in the saving and checking account, any accounts receivable, or inventory for sale. A long-term Asset usually is classified when something is held for a longer period of time. Property, Plant, and Equipment are examples of long-term assets since they are kept longer than a year and but lose their value over time. Other assets considered long term are trademarks, patents, and Goodwill. 


In regards to liabilities, current liabilities that a company has to pay within a year of its operating cycle. Long-term liabilities usually are obligations that the company pays off over a longer period of time( Kimmel & Weygandt, 2017).


So time plays an important part in how they are classified. A credit card balance, accounts payable, wages and payroll taxes would be classified under current liabilities. A building or car lease, mortgage, or any investments that are made that will be of use for the company over time and will eventually depreciate in value, would be classified as long-term liabilities.


Besides it being good practice to know what current and long-term assets and liabilities a company has, it helps the company to allocate its financial resources properly and it shows that the business is keeping its books in order. A company that has a good overview of it's finances will more likely make smarter decisions in terms of spending and budgeting. Also, if the company would look for investors or a loan from the bank, it will show that the company is responsible and it will help them to determine to issue these loans. 


Sincerely,

Lukas


References


Kimmel, P. D., & Weygandt, J. (2017). Survey of accounting (1st ed.). Retrieved from http://www.gcumedia.com/digital-resources/wiley-and-sons/2016/survey-of-accounting_ebook_1e.php

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